D-Wave Quantum Inc

Previous wording

The following discussion is intended to assist you in understanding our present business and the results of operations together with our present financial condition. This section should be read in conjunction with our unaudited condensed consolidated financial statements and the accompanying notes contained in Part I, Item I of this Report, as well as our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission on March 29, 2024. In this section, unless otherwise specified, the terms “we”, “our”, “us”, D-Wave" or the "Company" refer to D-Wave Quantum Inc. and its subsidiaries following the closing of the merger between DPCM Capital, Inc. ("DPCM"), D-Wave Systems Inc., and certain other affiliated entities through a series of transactions (the "Merger") on August 5, 2022 (the "Closing") while "D-Wave Systems" refers to D-Wave Systems Inc. prior to the Closing. All other capitalized terms have the meanings ascribed thereto elsewhere in this Report. All dollar amounts are expressed in thousands of United States dollars (“$”), unless otherwise indicated.

Current wording

The following discussion is intended to assist you in understanding our present business and the results of operations together with our present financial condition. This section should be read in conjunction with our unaudited condensed consolidated financial statements and the accompanying notes contained in Part I, Item I of this Quarterly Report of Form 10-Q (this "Report"), as well as our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission on March 29, 2024. In this section, unless otherwise specified, the terms “we”, “our”, “us”, D-Wave" or the "Company" refer to D-Wave Quantum Inc. and its subsidiaries following the closing of the merger between DPCM Capital, Inc. ("DPCM"), D-Wave Systems Inc., and certain other affiliated entities through a series of transactions (the "Merger") on August 5, 2022 (the "Closing") while "D-Wave Systems" refers to D-Wave Systems Inc. prior to the Closing. All other capitalized terms have the meanings ascribed thereto elsewhere in this Report. All dollar amounts are expressed in thousands of United States dollars (“$”), unless otherwise indicated.

Previous wording

During the three months ended June 30, 2024 and 2023, we generated revenue totaling $2.2 million and $1.7 million, respectively. During the six months ended June 30, 2024 and 2023, we generated revenue totaling $4.6 million and $3.3 million, respectively. We have incurred significant operating losses since inception. For the three months ended June 30, 2024 and 2023, our net losses were $17.8 million and $26.2 million, respectively. For the six months ended June 30, 2024 and 2023, our net losses were $35.1 million and $50.6 million, respectively. We expect to continue to incur significant losses for the foreseeable future as we continue to invest in a number of research and development programs as well as a variety of go-to-market initiatives. As of June 30, 2024, we had an accumulated deficit of $518.2 million.

Current wording

During the three months ended September 30, 2024 and 2023, we generated revenue totaling $1.9 million and $2.6 million, respectively. During the nine months ended September 30, 2024 and 2023, we generated revenue totaling $6.5 million and $5.9 million, respectively. We have incurred significant operating losses since inception. For the three months ended September 30, 2024 and 2023, our net losses were $22.7 million and $16.1 million, respectively. For the nine months ended September 30, 2024 and 2023, our net losses were $57.8 million and $66.7 million, respectively. We expect to continue to incur significant losses for the foreseeable future as we continue to invest in a number of research and development programs as well as a variety of go-to-market initiatives. As of September 30, 2024, we had an accumulated deficit of $540.9 million.

Previous wording

We expect that QCaaS revenue, as a percentage of total revenue, will increase due to an increasing number of QCaaS agreements being driven by the completion of professional services engagements yielding production applications that require QCaaS services, as well as by customers that choose to access our Leap cloud service without utilizing our professional services organization.

Current wording

We expect that QCaaS revenue, as a percentage of total revenue, will increase due to an increasing number of QCaaS agreements being driven by the completion of professional services engagements yielding production applications that require QCaaS services, as well as by customers that choose to access our Leap TM cloud service without utilizing our professional services organization.

Previous wording

We expect our general and administrative expenses to decrease in absolute dollars in the near term due to significant investments in scaling up our ability to operate as a public company made in prior years. However, in the longer term we expect general and administrative expenses to increase in absolute dollars as we continue to invest in more comprehensive compliance and governance functions, increased IT security and compliance, and expanded internal controls over financial reporting in accordance with the Sarbanes-Oxley Act. However, non-cash stock-based compensation expenses may cause downward fluctuations in these costs from time to time.

Current wording

We expect our general and administrative expenses to decrease in absolute dollars in the near term due to significant investments in scaling up our ability to operate as a public company made in prior years. However, in the longer term we expect general and administrative expenses to increase in absolute dollars as we continue to invest in more comprehensive compliance and governance functions, increased IT security and compliance, and expanded internal controls over financial reporting in accordance with the Sarbanes-Oxley Act of 2002. However, non-cash stock-based compensation expenses may cause downward fluctuations in these costs from time to time.

Previous wording

Revenue increased by $0.5 million, or 28%, to $2.2 million for the three months ended June 30, 2024 as compared to $1.7 million for the three months ended June 30, 2023. The increase was due primarily to an increase in QCaaS revenue of $0.7 million stemming from an increase in the average revenue per QCaaS customer, partially offset by a decrease of $0.2 million in professional service revenue during the period ending June 30, 2024.

Current wording

Revenue decreased by $0.7 million, or 27%, to $1.9 million for the three months ended September 30, 2024 as compared to $2.6 million for the three months ended September 30, 2023. The decrease was due primarily to a decrease of $1.1 million in professional service revenue, partially offset by an increase in QCaaS revenue of $0.5 million stemming from an increase in the average revenue per QCaaS customer.

Previous wording

Cost of revenue decreased by $0.2 million, or 21%, to $0.8 million for the three months ended June 30, 2024 as compared to $1.0 million for the three months ended June 30, 2023. The decrease in cost of revenue was primarily driven by a decrease in non-cash stock-based compensation and personnel costs of $0.1 million and $0.1 million, respectively.

Current wording

Cost of revenue decreased by $0.2 million, or 20%, to $0.8 million for the three months ended September 30, 2024 as compared to $1.0 million for the three months ended September 30, 2023. The decrease in cost of revenue was primarily driven by a decrease in non-cash stock-based compensation of $0.2 million.

Previous wording

Research and development expenses decreased by $1.2 million, or 12%, to $8.4 million for the three months ended June 30, 2024 compared to $9.5 million for the three months ended June 30, 2023. In particular, the decrease was primarily driven by decreases in personnel costs of $0.6 million, stock-based compensation expenses of $0.4 million and fabrication and related expenses of $0.3 million.

Current wording

Research and development expenses decreased by $0.8 million, or 8%, to $8.7 million for the three months ended September 30, 2024 compared to $9.5 million for the three months ended September 30, 2023. The decrease was primarily driven by decreases in stock-based compensation expenses of $1.0 million and fabrication and related expenses of $0.2 million, partially offset by increases in professional service expenses of $0.3 million and personnel costs of $0.1 million.

Previous wording

Sales and marketing expenses increased by $1.9 million, or 77%, to $4.4 million for the three months ended June 30, 2024 as compared to $2.5 million for the three months ended June 30, 2023. The increase was primarily driven by increases in marketing expenses of $0.8 million, personnel costs of $0.7 million and stock-based compensation expense of $0.3 million.

Current wording

Sales and marketing expenses increased by $1.3 million, or 52%, to $3.8 million for the three months ended September 30, 2024 as compared to $2.5 million for the three months ended September 30, 2023. The increase was primarily driven by increases in personnel costs of $0.8 million, stock-based compensation expense of $0.2 million, travel expenses of $0.2, marketing expenses of $0.1 million, and software expenses of $0.1 million.

Previous wording

Fair value of Term Loan increased by $0.28 million for the three months ended June 30, 2024 as compared to an increase of $0.35 million for the three months ended June 30, 2023. On April 13, 2023, the Company entered into a Term Loan with PSPIB. The Company opted for the fair value option for accounting of the Term Loan (see Note 2 to the accompanying condensed consolidated financial statements). Changes in the fair value of the Term Loan, excluding changes due to the Company's own credit risk, are recorded as gains or losses in the Company’s condensed consolidated statements of operations and comprehensive loss in each reporting period. The fair value of the Term Loan varies primarily based on the market yield rate, market yield volatility, probability for an event of default and the probability of the issuance of shares of D-Wave’s common stock, par value $0.0001, (the "Common Share") under a purchase agreement with Lincoln Park on June 16, 2022 (the "Purchase Agreement").

Current wording

The fair value of Term Loan increased by $1.6 million for the three months ended September 30, 2024 as compared to a decrease of $1.7 million for the three months ended September 30, 2023. On April 13, 2023, the Company entered into a Term Loan with PSPIB. The Company opted for the fair value option for accounting of the Term Loan (see Note 2 to the accompanying condensed consolidated financial statements). Changes in the fair value of the Term Loan, excluding changes due to the Company's own credit risk, are recorded as gains or losses in the Company’s condensed consolidated statements of operations and comprehensive loss in each reporting period. The fair value of the Term Loan varies primarily based on the market yield rate, market yield volatility, and the probabilities of various settlement outcomes.

Previous wording

Term Loan debt issuance costs decreased by $1.4 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, as there were no advances on the Term Loan during the three months ended June 30, 2024.

Current wording

Term Loan debt issuance costs decreased by $0.7 million for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, as there were no advances on the Term Loan during the three months ended September 30, 2024.

Previous wording

Fair value of warrant liabilities decreased by $2.2 million for the three months ended June 30, 2024 as compared to an increase of $2.2 million for the three months ended June 30, 2023. The fair value of the warrant liabilities varies primarily with the trading price of the Public Warrants listed on the New York Stock Exchange (see Note 2 and Note 7 to the accompanying condensed consolidated financial statements).

Current wording

Fair value of warrant liabilities decreased by $0.5 million for the three months ended September 30, 2024 as compared to a decrease of $1.4 million for the three months ended September 30, 2023. The fair value of the warrant liabilities varies primarily with the trading price of the Public Warrants listed on the New York Stock Exchange (see Note 2 and Note 7 to the accompanying condensed consolidated financial statements).

Previous wording

Other income (expense), net increased by $1.3 million or 156%, to $0.5 million for the three months ended June 30, 2024 as compared to $(0.8) million for the three months ended June 30, 2023. The increase was primarily driven by the net impact of foreign exchange gains of $1.1 million and increase in interest income of $0.2 million.

Current wording

Other income (expense), net decreased by $0.7 million, or 79%, to $0.2 million for the three months ended September 30, 2024 as compared to $0.9 million for the three months ended September 30, 2023. The decrease was primarily driven by the net impact of foreign exchange loss of $1.3 million, partially offset by an increase in interest income of $0.6 million, due primarily to higher interest rates earned on cash and cash equivalent balances.

Previous wording

Revenue increased by $1.4 million, or 41%, to $4.6 million for the six months ended June 30, 2024 as compared to $3.3 million for the six months ended June 30, 2023, with the increase due primarily to an increase in QCaaS revenue of $1.3 million, primarily due to an increase in the average revenue per QCaaS customer, as well as an increase of $0.1 million in professional service revenue, primarily driven by an increase in training revenue.

Current wording

Revenue increased by $0.7 million, or 11%, to $6.5 million for the nine months ended September 30, 2024 as compared to $5.9 million for the nine months ended September 30, 2023, with the increase due primarily to an increase in QCaaS revenue of $1.7 million, primarily due to an increase in the average revenue per QCaaS customer, partially offset by a decrease of $0.9 million in professional service revenue.

Previous wording

Cost of revenue decreased by $0.6 million, or 26%, to $1.6 million for the six months ended June 30, 2024 as compared to $2.2 million for the six months ended June 30, 2023. The decrease in cost of revenue was primarily driven by a decrease in non-cash stock-based compensation of $0.3 million, personnel costs of $0.2 million and quantum computing infrastructure costs of $0.1 million, respectively.

Current wording

Cost of revenue decreased by $0.8 million, or 24%, to $2.4 million for the nine months ended September 30, 2024 as compared to $3.2 million for the nine months ended September 30, 2023. The decrease in cost of revenue was primarily driven by a decrease in non-cash stock-based compensation of $0.5 million, personnel costs of $0.2 million and quantum computing infrastructure costs of $0.1 million.

Previous wording

Research and development expenses decreased by $3.6 million, or 18%, to $16.9 million for the six months ended June 30, 2024 compared to $20.5 million for the six months ended June 30, 2023. The decrease was primarily driven by decreases in stock-based compensation expenses of $2.0 million, personnel costs of $0.8 million, fabrication expenses of $0.5 million and facilities expenses of $0.3 million.

Current wording

Research and development expenses decreased by $4.4 million, or 15%, to $25.5 million for the nine months ended September 30, 2024 compared to $29.9 million for the nine months ended September 30, 2023. The decrease was primarily driven by decreases in stock-based compensation expenses of $3.0 million, personnel costs of $0.7 million and fabrication expenses of $0.7 million.

Previous wording

General and administrative expenses decreased by $2.1 million, or 22%, to $7.5 million for the three months ended June 30, 2024 as compared to $9.6 million for the three months ended June 30, 2023. The decrease was primarily driven by decreases in professional fees of $1.7 million, stock-based compensation expense of $0.4 million and insurance costs of $0.3 million, partially offset by increases in bad debt expenses of $0.2 million.

Current wording

General and administrative expenses decreased by $4.6 million, or 16%, to $24.3 million for the nine months ended September 30, 2024 as compared to $28.9 million for the nine months ended September 30, 2023. The decrease was primarily driven by decreases in professional fees of $2.7 million, stock-based compensation expense of $2.6 million and insurance costs of $0.8 million, partially offset by an increase in credit loss expenses of $1.2 million.

Previous wording

Sales and marketing expenses increased by $2.1 million, or 39%, to $7.5 million for the six months ended June 30, 2024 as compared to $5.4 million for the six months ended June 30, 2023. The increase was primarily driven by increases in personnel costs of $1.7 million, marketing expenses of $0.3 million and stock-based compensation expense of $0.3 million.

Current wording

Sales and marketing expenses increased by $3.4 million, or 43%, to $11.2 million for the nine months ended September 30, 2024 as compared to $7.9 million for the nine months ended September 30, 2023. The increase was primarily driven by increases in personnel costs of $2.5 million, stock-based compensation expense of $0.5 million and marketing expenses of $0.3 million.

Previous wording

Interest expense increased by $0.6 million, or 102%, to $1.2 million for the three months ended June 30, 2024 as compared to $0.6 million for the three months ended June 30, 2023. The increase is primarily due to accrued interest related to the Term Loan, which was advanced to us in two tranches, each in an aggregate principal amount of $15.0 million, on April 14, 2023 and July 13, 2023, respectively. Refer to Note 6 to the accompanying unaudited condensed consolidated financial statements for further details.

Current wording

Interest expense increased by $1.7 million, or 91%, to $3.5 million for the nine months ended September 30, 2024 as compared to $1.8 million for the nine months ended September 30, 2023. The increase is primarily due to interest expenses related to the Term Loan, which was advanced to us in two tranches, each in an aggregate principal amount of $15.0 million, on April 14, 2023 and July 13, 2023, respectively. During the nine months ended September 30, 2024, the Company had prepaid $16.4 million in principal of the Term Loan, reducing interest expense incurred. Refer to Note 6 to the accompanying unaudited condensed consolidated financial statements for further details.

Previous wording

Fair value of Term Loan decreased by $0.9 million for the six months ended June 30, 2024 as compared to an increase of $0.3 million for the six months ended June 30, 2023. As previously mentioned, on April 13, 2023, the Company entered into a Term Loan with PSPIB. The Company opted for the fair value option for accounting of the Term Loan (see Note 2 to the accompanying condensed consolidated financial statements). Changes in the fair value of the Term Loan, excluding changes due to the Company's own credit risk, are recorded as gains or losses in the Company’s condensed consolidated statements of operations and comprehensive loss in each reporting period. The fair value of the Term Loan varies primarily based on the market yield rate, market yield volatility, probability for an event of default and the probability of the issuance of shares of D-Wave’s Common Shares under the Purchase Agreement.

Current wording

The fair value of Term Loan increased by $0.6 million for the nine months ended September 30, 2024 as compared to a decrease of $1.4 million for the nine months ended September 30, 2023. As previously mentioned, on April 13, 2023, the Company entered into a Term Loan with PSPIB. The Company opted for the fair value option for accounting of the Term Loan (see Note 2 to the accompanying condensed consolidated financial statements). Changes in the fair value of the Term Loan, excluding changes due to the Company's own credit risk, are recorded as gains or losses in the Company’s condensed consolidated statements of operations and comprehensive loss in each reporting period. The fair value of the Term Loan varies primarily based on the market yield rate, market yield volatility, and the probabilities of various settlement scenarios.

Previous wording

Term Loan debt issuance costs decreased by $1.4 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, as there were no advances on the Term Loan during the six months ended June 30, 2024.

Current wording

Term Loan debt issuance costs decreased by $2.1 million for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, as there were no advances on the Term Loan during the nine months ended September 30, 2024.

Previous wording

Gain (loss) on investment in marketable equity securities increased by $1.5 million for the six months ended June 30, 2024 as compared to zero for the six months ended June 30, 2023. On January 5, 2024, an investee of the Company was acquired for a combination of cash and stock in an observable orderly transaction. Consequently, the carrying value of the Company's investment was adjusted based on the consideration received, resulting in a net gain of $1.7 million, partially offset by a loss associated with the fair value of the conversion feature of the Zapata convertible notes (see Note 4 to the accompanying condensed consolidated financial statements).

Current wording

Gain (loss) on investment in marketable equity securities increased by $1.5 million for the nine months ended September 30, 2024 as compared to zero for the nine months ended September 30, 2023. On January 5, 2024, an investee of the Company was acquired for a combination of cash and stock in an observable orderly transaction. Consequently, the carrying value of the Company's investment was adjusted based on the consideration received, resulting in a net gain of $1.7 million, partially offset by a loss associated with the fair value of the conversion feature of the Zapata Note.

Previous wording

Fair value of warrant liabilities increased by $0.5 million to $2.1 million for the six months ended June 30, 2024 as compared to an increase of $1.5 million for the six months ended June 30, 2023. The fair value of the warrant liabilities varies primarily with the trading price of the Public Warrants listed on the New York Stock Exchange (see Note 2 and Note 7 to the accompanying condensed consolidated financial statements).

Current wording

Change in fair value of warrant liabilities was minimal for both the nine months ended September 30, 2024 and the nine months ended September 30, 2023. The fair value of the warrant liabilities varies primarily with the trading price of the Public Warrants listed on the New York Stock Exchange (see Note 2 and Note 7 to the accompanying condensed consolidated financial statements).

Previous wording

Other income (expense), net increased by $2.6 million or 266%, to $1.6 million for the six months ended June 30, 2024 as compared to $(1.0) million for the six months ended June 30, 2023. The increase was primarily driven by the net impact of foreign exchange gains of $2.1 million and increase in interest income of $0.4 million.

Current wording

Other income (expense), net increased by $1.8 million or 5365%, to net income of $1.8 million for the nine months ended September 30, 2024 as compared to net expense of $34.0 thousand for the nine months ended September 30, 2023. The increase was primarily driven by the net impact of foreign exchange gains of $0.8 million and increase in interest income of $1.0 million, due primarily to higher interest rates earned on cash and cash equivalent balances.

Previous wording

Since its inception, the Company has incurred net losses and negative cash flows from operations. As of June 30, 2024, the Company had an accumulated deficit of $518.2 million. For the three months ended June 30, 2024 and 2023, the Company incurred a net loss of $17.8 million and $26.2 million, respectively. For the six months ended June 30, 2024 and 2023, the Company incurred a net loss of $35.1 million and $50.6 million, respectively. For the six months ended June 30, 2024 and 2023, the Company had net cash outflows from operating activities of $26.6 million and $29.0 million, respectively. As of June 30, 2024, the Company had cash of $40.9 million and working capital (current assets less current liabilities) of $4.0 million. Additionally, total liabilities exceeded total assets at June 30, 2024 by $21.5 million. The Company expects to incur additional operating losses and negative cash flows from operating activities as it continues to expand its commercial operations and research and development programs.

Current wording

Since its inception, the Company has incurred net losses and negative cash flows from operations. As of September 30, 2024, the Company had an accumulated deficit of $540.9 million. For the three months ended September 30, 2024 and 2023, the Company incurred a net loss of $22.7 million and $16.1 million, respectively. For the nine months ended September 30, 2024 and 2023, the Company incurred a net loss of $57.8 million and $66.7 million, respectively. For the nine months ended September 30, 2024 and 2023, the Company had net cash outflows from operating activities of $44.7 million and $45.9 million, respectively. As of September 30, 2024, the Company had cash of $29.3 million and working capital (current assets less current liabilities) of $9.3 million. Additionally, total liabilities exceeded total assets at September 30, 2024 by $16.9 million. The Company expects to incur additional operating losses and negative cash flows from operating activities as it continues to expand its commercial operations and research and development programs.

Previous wording

On April 13, 2023 (the "Closing Date"), the Company finalized a Term Loan and Security Agreement ("Term Loan") with PSPIB Unitas Investments II Inc. ("PSPIB" or the "Lender"), a related party to the Company's largest shareholder. The Term Loan, outlined in Note 6 - Loans payable, net, provides$50.0 million in three tranches, with financial performance requirements. The first two tranches of$15.0 million each were disbursed on April 14, 2023, and July 13, 2023, respectively. The third tranche of $20.0 million is contingent on meeting specific criteria, including a non-dilutive financing closure. There can be no assurance that the Company will be able to meet the conditions necessary to draw on the third tranche. As of August 7, 2024, the Company had prepaid $15.8 million for the Term Loan (see Note 12). According to the terms of the sixth amendment, this prepayment qualifies for the prepayment premium exemption for up to $20.0 million in gross proceeds received (see Note 6). On August 7, 2024, the Company entered into the Limited Waiver Agreement with PSPIB, relating to the Term Loan. Refer to Note 12 - Subsequent events for further details. Pursuant to the terms of the Limited Waiver Agreement, the Company was granted a waiver of compliance for the 2024 second quarter permitted variance covenant. The requirement for a waiver resulted in reclassification of the loan balance to current liabilities on the condensed consolidated balance sheets.

Current wording

On April 13, 2023 (the "Closing Date"), the Company finalized a Term Loan and Security Agreement ("Term Loan") with PSPIB Unitas Investments II Inc. ("PSPIB" or the "Lender"), a related party to the Company's largest shareholder. The Term Loan, outlined in Note 6 - Loans payable, net, provides$50.0 million in three tranches, with financial performance requirements. The first two tranches of$15.0 million each were disbursed on April 14, 2023, and July 13, 2023, respectively. The third tranche of $20.0 million is contingent on meeting specific criteria, including a non-dilutive financing closure. As of September 30, 2024, the Company had prepaid $21.1 million of the Term Loan, including $16.4 million in principal and $4.2 million in accrued PIK interest. The remaining balance as of September 30, 2024 was $13.7 million at amortized cost. The Term Loan was subsequently repaid in full on October 22, 2024.

Previous wording

In conjunction with the Merger, the Company and D-Wave Systems entered into the Purchase Agreement with Lincoln Park Capital Fund, LLC ("Lincoln Park") on June 16, 2022, which provides D-Wave the sole right, but not the obligation, to direct Lincoln Park to buy specified dollar amounts up to$150.0 million of D-Wave's common stock, par value $0.0001 per share through November 1, 2025. The Purchase Agreement may provide the Company and D-Wave with additional liquidity to fund the business, subject to the conditions set forth in the agreement, including volume limitations tied to periodic market prices, ownership limitations restricting Lincoln Park from owning more than 9.9% of the then total outstanding Common Shares and a floor price of $1.00 at or below which the Company may not sell to Lincoln Park any Common Shares. When the Company sells shares to Lincoln Park, Lincoln Park may resell all, some, or none of those Common Shares at any time or from time to time in its discretion. During the six months ended June 30, 2024, the Company has received$20.3 million in proceeds through the issuance of 14,948,550 Common Shares to Lincoln Park under the Purchase Agreement. In order for the Company to issue Common Shares under the Purchase Agreement, the Company's share price must be above the floor price of $1.00. There is no assurance that the floor price will not fall below $1.00 preventing the Company from being able to make sales to Lincoln Park in the future. As of June 30, 2024, D-Wave had $61.8 million of issuance capacity under the Purchase Agreement.

Current wording

In conjunction with the Merger, the Company and D-Wave Systems entered into a purchase agreement with Lincoln Park Capital Fund, LLC ("Lincoln Park") on June 16, 2022, which provides D-Wave the sole right, but not the obligation, to direct Lincoln Park to buy specified dollar amounts up to$150.0 million of D-Wave's common stock, par value $0.0001 per share through November 1, 2025. The Purchase Agreement may provide the Company and D-Wave with additional liquidity to fund the business, subject to the conditions set forth in the agreement, including volume limitations tied to periodic market prices, ownership limitations restricting Lincoln Park from owning more than 9.9% of the then total outstanding Common Shares and a floor price of $1.00 at or below which the Company may not sell to Lincoln Park any Common Shares. When the Company sells shares to Lincoln Park, Lincoln Park may resell all, some, or none of those Common Shares at any time or from time to time in its discretion. During the nine months ended September 30, 2024, the Company has received$32.2 million in proceeds through the issuance of 25,569,997 Common Shares to Lincoln Park under the Purchase Agreement. In order for the Company to issue Common Shares under the Purchase Agreement, the Company's share price must be above the floor price of $1.00. There is no assurance that the floor price will not fall below $1.00 preventing the Company from being able to make sales to Lincoln Park in the future. As of September 30, 2024, D-Wave had $49.9 million of issuance capacity under the Purchase Agreement.

Previous wording

On May 24, 2024, the Company entered into an at-the-market sales agreement (the “ATM Agreement”) with Needham & Company, LLC, B. Riley Securities, Inc. and Roth Capital Partners, LLC (collectively, the “Agents”), pursuant to which the Company may sell from time to time, at its option, shares of the Company’s common stock, par value $0.0001 per share, through or to the Agents, as sales agent or principal. In accordance with the terms of the ATM Agreement, the Company may offer and sell shares of its common stock having an aggregate offering price of up to $100.0 million from time to time through or to the Agents, as sales agent or principal. During the six months ended June 30, 2024, the Company has received $9.1 million in proceeds through the issuance of 8,279,098 Common Shares under the Sales Agreement. As of June 30, 2024, D-Wave had $90.7 million of issuance capacity under the ATM Agreement.

Current wording

On May 24, 2024, the Company entered into an at-the-market sales agreement (the “ATM Agreement”) with Needham & Company, LLC, B. Riley Securities, Inc. and Roth Capital Partners, LLC (collectively, the “Agents”), pursuant to which the Company may sell from time to time, at its option, shares of the Company’s common stock, par value $0.0001 per share, through or to the Agents, as sales agent or principal. In accordance with the terms of the ATM Agreement, the Company may offer and sell shares of its common stock having an aggregate offering price of up to $100.0 million from time to time through or to the Agents, as sales agent or principal. During the nine months ended September 30, 2024, the Company has received $20.7 million in proceeds through the issuance of 19,337,124 Common Shares under the Sales Agreement. As of September 30, 2024, D-Wave had $79.1 million of issuance capacity under the ATM Agreement.

Previous wording

The sale, if any, of shares of the Company’s common stock under the ATM Agreement will be made by any method permitted that is deemed to be an “at-the-market” equity offering as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended (the “Securities Act”), including sales made directly on the New York Stock Exchange or any other trading market for the Company’s common stock. Subject to the terms and conditions of the Sales Agreement, the Agents will use commercially reasonable efforts to sell the shares of the Company’s common stock from time to time, based upon the Company’s instructions.

Current wording

The sale of shares of the Company’s common stock under the ATM Agreement will be made by any method permitted that is deemed to be an “at-the-market” equity offering as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended (the “Securities Act”), including sales made directly on the New York Stock Exchange or any other trading market for the Company’s common stock. Subject to the terms and conditions of the ATM Agreement, the Agents will use commercially reasonable efforts to sell the shares of the Company’s common stock from time to time, based upon the Company’s instructions.

Previous wording

For the six months ended June 30, 2024, net cash used in operating activities was $26.6 million, a decrease of $2.5 million from $29.0 million for the six months ended June 30, 2023. The change is primarily due to a decrease in net loss of $15.5 million, offset by a decrease in noncash items of $9.1 million and a decrease in cash released from working capital of $4.0 million. The decrease in noncash items was primarily due to a decrease in stock-based compensation of $3.7 million, an increase in unrealized foreign exchange gain of $2.2 million, a gain on marketable securities of $1.5 million, a decrease in fair value of Term Loan of $1.3 million and a decrease in debt issuance costs of $0.6 million, partially offset by an increase in non-cash interest expense of $1.5 million. The decrease in working capital was primarily driven by a decrease in change in prepaid expenses and other current assets of $2.0 million, a decrease in change in deferred revenue of $1.3 million and an increase in change in trade accounts payable of $0.8 million.

Current wording

For the nine months ended September 30, 2024, net cash used in operating activities was $44.7 million, a decrease of $1.3 million from $45.9 million for the nine months ended September 30, 2023. The change is primarily due to a decrease in net loss of $8.9 million, offset by a decrease in noncash items of $10.0 million and an increase in cash released from working capital of $2.4 million. The decrease in noncash items was primarily due to a decrease in stock-based compensation of $5.6 million, a decrease in non-cash interest expense of $3.1 million due to the cash settlement of accrued PIK interest on the Term Loan, a gain on marketable securities of $1.5 million, a decrease in debt issuance costs of $1.0 million, and an increase in unrealized foreign exchange gain of $0.8 million, partially offset by an increase in fair value of Term Loan of $2.0 million. The decrease in working capital was primarily driven by an increase in change in accrued expenses and other current liabilities of $2.3 million, a decrease in change in trade accounts payable of $1.4 million, a decrease in change in operating lease liability of $0.7 million and an increase in change in other non-current assets of $0.6 million, partially offset by a decrease in change in prepaid expenses and other current assets of $2.5 million.

Previous wording

Net cash used in investing activities during the six months ended June 30, 2024 was $1.8 million, an increase of $1.7 million in cash used in investing activities from $0.1 million for the six months ended June 30, 2023. The increase is primarily due to purchase of convertible note of $1.0 million and an increase in purchase of property and equipment of $0.8 million. On February 8, 2024, the Company purchased a convertible Senior Secured Note with a principal amount of $1.0 million from Zapata. Refer to Note 2 and Note 4 to the unaudited condensed consolidated financial statements for further details.

Current wording

Net cash used in investing activities during the nine months ended September 30, 2024 was $2.2 million, an increase of $2.0 million in cash used in investing activities from $0.2 million for the nine months ended September 30, 2023. The increase is primarily due to purchase of convertible note of $1.0 million and an increase in purchase of property and equipment of $1.0 million.

Previous wording

Cash Flows Provided by (Used in) Financing Activities

Current wording

Cash Flows Provided by Financing Activities

Previous wording

Net cash provided by financing activities during the six months ended June 30, 2024 was $27.9 million, a decrease of $1.8 million from cash provided by financing activities of $29.7 million for the six months ended June 30, 2023. The decrease is primarily due to a decrease in debt financing proceeds of $14.4 million, a decrease in proceeds from the issuance of common stock upon exercise of stock options of $1.2 million, and the payment of tax withheld for common stock issued under stock-based compensation plans of $1.4 million. The decrease was partially offset by an increase in proceeds from the issuance of common stock pursuant to the Lincoln Park Purchase Agreement of $4.6 million, proceeds from the issuance of common stock pursuant to the ATM agreement of $9.1 million and a decrease in debt repayments of $1.5 million.

Current wording

Net cash provided by financing activities during the nine months ended September 30, 2024 was $34.9 million, a decrease of $57.5 million from cash provided by financing activities of $92.4 million for the nine months ended September 30, 2023. The decrease is primarily due to a decrease in proceeds from the issuance of common stock pursuant to the Purchase Agreement of $29.2 million, a decrease in debt financing proceeds of $29.0 million, an increase in debt repayments of $16.4 million, as well as a decrease in proceeds from the issuance of common stock upon exercise of stock options of $1.8 million, and the payment of tax withheld for common stock issued under stock-based compensation settlements of $1.5 million. The decrease was partially offset by proceeds from the issuance of common stock pursuant to the ATM Agreement of $20.7 million.

Previous wording

A discussion of recent accounting pronouncements is included in Note 2 to our unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q.

Current wording

A discussion of recent accounting pronouncements is included in Note 2 to our unaudited condensed consolidated financial statements included elsewhere in this Report.